Anderson International Limited is evaluating a project in Erewhon. The project will create the following...
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| Anderson International Limited is evaluating a project in Erewhon. The project will create the following cash flows: |
| Year | Cash Flow |
| 0 | $875,000 |
| 1 | 306,900 |
| 2 | 287,600 |
| 3 | 285,300 |
| 4 | 259,300 |
| All cash flows will occur in Erewhon and are expressed in dollars. In an attempt to improve its economy, the Erewhonian government has declared that all cash flows created by a foreign company are blocked and must be reinvested with the government for one year. The reinvestment rate for these funds is 4 percent. Assume Anderson uses a required return of 10 percent on this project. |
| a. | What is the NPV of the project? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
| b. | What is the IRR of the project? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) |
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